2014

Akamai Reports Third Quarter 2012 Financial Results

CAMBRIDGE, Mass., Oct. 24, 2012 /PRNewswire/ -- 

  • Third quarter revenue of $345 million, up 23 percent year over year
  • GAAP net income of $48 million, up 14 percent year over year; or $0.27 per diluted share, up 17 percent year over year
  • Normalized net income* of $79 million, up 24 percent year over year; or $0.43 per diluted share, up 26 percent year over year

Akamai Technologies, Inc. (NASDAQ: AKAM), the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere, today reported financial results for the third quarter ended September 30, 2012.  Revenue for the third quarter of 2012 was $345 million, a 23 percent increase over third quarter 2011 revenue of $282 million, and a 4 percent increase over second quarter 2012 revenue of $331 million.

(Logo: http://photos.prnewswire.com/prnh/20100225/AKAMAILOGO )

Net income in accordance with United States Generally Accepted Accounting Principles, or GAAP, for the third quarter of 2012 was $48 million, or $0.27 per diluted share, a 14 percent increase from third quarter 2011 GAAP net income of $42 million, or $0.23 per diluted share, and a 9 percent increase from second quarter 2012 GAAP net income of $44 million, or $0.24 per diluted share.

The Company generated normalized net income* of $79 million, or $0.43 per diluted share, in the third quarter of 2012, a 24 percent increase over third quarter 2011 normalized net income of $63 million, or $0.34 per diluted share, and a 1 percent increase from the prior quarter normalized net income of $78 million, or $0.43 per diluted share. (*See Use of Non-GAAP Financial Measures below for definitions.)

"Akamai experienced its fourth consecutive quarter of accelerating revenue growth and delivered higher margins," said Paul Sagan, President and CEO of Akamai.  "We continued to capitalize on our investments in cloud computing, web security, mobile services, and online video by expanding our product portfolio, while effectively managing the cost and efficiency of our network. These efforts paid off in both the Company's top and bottom line performance."

Adjusted EBITDA* for the third quarter of 2012 was $157 million, up 28 percent from $122 million in the third quarter of 2011, and up 9 percent from $143 million in the prior quarter.  Adjusted EBITDA margin* for the third quarter was 45 percent, up two points from the prior quarter and from the same period last year.  (*See Use of Non-GAAP Financial Measures below for definitions.)

Cash from operations was $141 million in the third quarter of 2012, or 41 percent of revenue.  At the end of the third quarter of 2012, the Company had over $1 billion in cash, cash equivalents and marketable securities.

Sales through resellers and sales outside the United States accounted for 22 percent and 29 percent, respectively, of revenue for the third quarter of 2012.

Share Repurchase Program
During the third quarter of 2012, under a share repurchase program that was approved by the Board of Directors in May 2012, the Company repurchased approximately 1 million shares of its common stock for $37 million, at an average price of $31.53 per share.  During the three quarters ended September 30, 2012, the Company repurchased approximately 4 million shares of its common stock for $112 million, at an average price of $31.31 per share. The Company has $68 million remaining on its current authorization, which runs through April 30, 2013.

The Company had approximately 177 million shares of common stock outstanding as of September 30, 2012. 

Quarterly Conference Call
Akamai will host a conference call today at 4:30 p.m. ET that can be accessed through 1-800-706-7745 (or 1-617-614-3472 for international calls) and using passcode No. 82472044.  A live Webcast of the call may be accessed at www.akamai.com in the Investor section.  In addition, a replay of the call will be available for one week following the conference through the Akamai Website or by calling 1-888-286-8010 (or 1-617-801-6888 for international calls) and using passcode No. 96448745.

About Akamai
Akamai® is the leading cloud platform for helping enterprises provide secure, high-performing user experiences on any device, anywhere.  At the core of the Company's solutions is the Akamai Intelligent Platform™ providing extensive reach, coupled with unmatched reliability, security, visibility and expertise.  Akamai removes the complexities of connecting the increasingly mobile world, supporting 24/7 consumer demand, and enabling enterprises to securely leverage the cloud.  To learn more about how Akamai is accelerating the pace of innovation in a hyperconnected world, please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.

 

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

(unaudited)








Sep. 30, 2012


Dec. 31, 2011

Assets





Cash and cash equivalents


$ 182,650


$ 559,197

Marketable securities


282,579


290,029

Accounts receivable, net


236,232


210,936

Deferred income tax assets, current portion


6,444


6,444

Prepaid expenses and other current assets


45,784


55,414

Current assets


753,689


1,122,020

Marketable securities


593,105


380,729

Property and equipment, net


331,218


293,043

Goodwill and other intangible assets, net


803,976


498,300

Other assets


15,365


7,924

Deferred income tax assets, net


42,101


43,485

Total assets


$ 2,539,454


$ 2,345,501






Liabilities and stockholders' equity





Accounts payable and accrued expenses


$ 184,365


$ 123,618

Other current liabilities


28,555


24,774

Current liabilities


212,920


148,392

Other liabilities


66,596


40,859

Total liabilities


279,516


189,251

Stockholders' equity


2,259,938


2,156,250

Total liabilities and stockholders' equity


$ 2,539,454


$ 2,345,501






 


Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data)

(unaudited)














Three Months Ended


Nine Months Ended



Sep. 30,


Jun. 30,


Sep. 30,


Sep. 30,


Sep. 30,



2012


2012


2011


2012


2011













Revenues

$                345,321


$                    331,306


$                    281,856


$            996,075


$           834,798













Costs and operating expenses: 











Cost of revenues * +

109,995


107,457


93,284


320,018


271,999


Research and development *

19,351


17,542


13,542


54,373


37,142


Sales and marketing *

75,924


75,882


54,520


219,096


160,722


General and administrative * +

54,511


57,997


50,834


168,214


140,710


Amortization of other intangible assets

5,381


5,463


4,185


15,611


12,754


Restructuring (benefit) charge

-


(46)


158


14


158


Total costs and operating expenses

265,162


264,295


216,523


777,326


623,485


Operating income

80,159


67,011


65,333


218,749


211,313













Interest income, net

1,593


1,626


3,002


4,865


9,058


Other (expense) income , net

(241)


1,131


(188)


449


(1,330)


Income before provision for income taxes

81,511


69,768


68,147


224,063


219,041


Provision for income taxes

33,280


25,529


25,862


88,366


78,218


Net income

$                  48,231


$                      44,239


$                      42,285


$            135,697


$           140,823













Net income per share:











    Basic

$                      0.27


$                          0.25


$                          0.23


$                  0.76


$                 0.76


    Diluted

$                      0.27


$                          0.24


$                          0.23


$                  0.75


$                 0.74













Shares used in per share calculations:











    Basic

177,455


178,547


183,085


178,040


185,515


    Diluted

181,053


181,817


185,704


181,738


189,089













* Includes stock-based compensation (see supplemental table for figures)


+ Includes depreciation and amortization (see supplemental table for figures)












 

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)


































Three Months Ended


Nine Months Ended






Sep. 30,


Jun. 30,


Sep. 30,


Sep. 30,


Sep. 30,






2012


2012


2011


2012


2011















 Cash flows from operating activities:











 Net income

$              48,231


$             44,239


$             42,285


$           135,697


$          140,823


 Adjustments to reconcile net income to net cash
 provided by operating activities:












 Depreciation and amortization 

53,457


50,112


41,761


149,203


124,228



 Stock-based compensation

22,635


25,621


15,141


69,180


42,465



 Provision for deferred income taxes, net

826


-


20,906


826


20,906



 Excess tax benefits from stock-based
 compensation

(2,540)


(1,635)


(610)


(17,589)


(11,460)



 Loss (gain) on investments and disposal
 of property and equipment, net

142


(107)


(176)


(62)


(172)



 Provision for doubtful accounts

(345)


(86)


782


(61)


1,236



 Changes in operating assets and liabilities:













 Accounts receivable

(27,974)


7,803


(8,277)


(21,587)


(7,821)




 Prepaid expenses and other
 current assets

2,131


4,663


(919)


11,103


(78)




 Accounts payable, accrued
 expenses and other current
 liabilities

44,591


15,939


445


54,732


(5,268)




 Accrued restructuring

(28)


(725)


(148)


(2,897)


(180)




 Deferred revenue

1,401


2,667


796


5,542


(1,386)




 Other noncurrent assets and
 liabilities 

(1,031)


1,061


4,303


(536)


13,355


 Net cash provided by operating activities

141,496


149,552


116,289


383,551


316,648















 Cash flows from investing activities:












 Cash paid for acquired businesses,
 net of cash received

(14,392)


-


-


(306,030)


(550)



 Purchases of property and equipment
 and capitalization of internal-use software
 costs

(60,294)


(55,539)


(47,317)


(159,177)


(136,292)



 Proceeds from sales and maturities of
 short- and long-term marketable securities

98,567


134,171


388,983


350,152


900,120



 Purchases of short- and long-term
 marketable securities

(137,809)


(135,845)


(149,318)


(554,303)


(727,453)



 Proceeds from the sale of property and
 equipment

-


2


47


12


135



 Decrease in restricted investments held for
 security deposits

-


-


-


-


221



 Net cash (used in) provided by investing
 activities

(113,928)


(57,211)


192,395


(669,346)


36,181















 Cash flows from financing activities:












 Proceeds from the issuance of common
 stock under stock option and employee
 stock purchase plans

6,066


15,491


1,183


28,635


13,305



 Excess tax benefits from stock-based
 compensation

2,540


1,635


610


17,589


11,460



 Taxes paid related to net share settlement
 of equity awards

(2,370)


(2,541)


(2,173)


(26,566)


(5,680)



 Repurchase of common stock

(36,523)


(67,213)


(155,125)


(111,649)


(247,738)


 Net cash used in financing activities

(30,287)


(52,628)


(155,505)


(91,991)


(228,653)
















 Effects of exchange rate changes on cash and
 cash equivalents

2,373


(1,441)


(3,209)


1,239


(443)
















 Net (decrease) increase in cash and cash equivalents

(346)


38,272


149,970


(376,547)


123,733


 Cash and cash equivalents, beginning of period

182,996


144,724


205,629


559,197


231,866


 Cash and cash equivalents, end of period

$            182,650


$           182,996


$           355,599


$           182,650


$          355,599

 
























Three Months Ended


Nine Months Ended



Sep. 30,


Jun. 30,


Sep. 30,


Sep. 30,


Sep. 30,



2012


2012


2011


2012


2011


Supplemental financial data
(in thousands):






















Stock-based compensation:











Cost of revenues

$                     684


$                   884


$                  634


$               2,251


$               1,779


Research and development

4,427


4,901


2,629


13,258


7,515


Sales and marketing

10,896


10,994


6,951


32,024


19,112


General and administrative

6,628


8,842


4,927


21,647


14,059


     Total stock-based compensation

$                22,635


$              25,621


$             15,141


$             69,180


$             42,465













Depreciation and amortization:











Network-related depreciation

$                41,022


$              37,989


$             31,662


$           113,616


$             93,594


Capitalized stock-based compensation
amortization

2,025


1,939


1,592


5,719


5,595


Other depreciation and amortization

5,029


4,721


4,322


14,257


12,285


Amortization of other intangible assets

5,381


5,463


4,185


15,611


12,754


Total depreciation and amortization

$                53,457


$              50,112


$             41,761


$           149,203


$           124,228













Capital expenditures:











Purchases of property and equipment

$                46,635


$              42,188


$             37,244


$           119,256


$           105,769


Capitalized internal-use software

13,659


13,351


10,073


39,921


30,523


Capitalized stock-based compensation

2,561


1,835


1,941


6,694


5,406


Total capital expenditures

$                62,855


$              57,374


$             49,258


$           165,871


$           141,698













Net increase (decrease) in cash, cash
equivalents, marketable
securities and
restricted marketable securities

$                39,889


$              39,725


$           (94,478)


$          (171,621)


$           (52,407)













End of period statistics:











Number of employees

2,884


2,654


2,356






Number of deployed servers

119,370


115,008


100,770

















 

*Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), Akamai has historically provided additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Legislative and regulatory pronouncements discourage the use of and emphasis on non-GAAP financial metrics and require companies to explain why non-GAAP financial metrics are relevant to management and investors. We believe that the inclusion of these non-GAAP financial measures in this press release and our earnings call helps investors to gain a meaningful understanding of our past performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts. Our management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods and to the performance of our competitors. These measures are also used by management in its financial and operational decision-making. There are limitations associated with reliance on these non-GAAP financial metrics because they are specific to our operations and financial performance, which may make comparisons with other companies' financial results more challenging. By providing both GAAP and non-GAAP financial measures, we believe that investors are able to compare our GAAP results to those of other companies while also gaining a better understanding of our operating performance as evaluated by management.

Akamai defines "Adjusted EBITDA" as net income, before interest, income taxes, depreciation and amortization of tangible and intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments, foreign exchange gains and losses, loss on early extinguishment of debt and gains and losses on legal settlements. Akamai considers Adjusted EBITDA to be an important indicator of the Company's operational strength and performance of its business and a good measure of the Company's historical operating trend.

Adjusted EBITDA eliminates items that are either not part of the Company's core operations, such as investment gains and losses, foreign exchange gains and losses, early debt extinguishment and net interest income, or that do not require a cash outlay, such as stock-based compensation. Adjusted EBITDA also excludes depreciation and amortization expense, which is based on the Company's estimate of the useful life of tangible and intangible assets. These estimates could vary from actual performance of the asset, are based on the historical cost incurred to build out the Company's deployed network, and may not be indicative of current or future capital expenditures.

Akamai defines "Adjusted EBITDA margin" as a percentage of Adjusted EBITDA as a percentage of revenues. Akamai considers Adjusted EBITDA margin to be an indicator of the Company's operating trend and performance of its business in relation to its revenue growth.

Akamai defines "capital expenditures" or "capex" as purchases of property and equipment, capitalization of internal-use software development costs and capitalization of stock-based compensation. Capital expenditures or capex are disclosed in Akamai's consolidated Statement of Cash Flows in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Akamai defines "normalized net income" as net income before amortization of other intangible assets, stock-based compensation expense, amortization of capitalized stock-based compensation, restructuring charges and benefits, acquisition related costs and benefits, certain gains and losses on investments, loss on early extinguishment of debt and gains and losses on legal settlements. Akamai considers normalized net income to be another important indicator of the overall performance of the Company because it eliminates the effects of events that are either not part of the Company's core operations or are non-cash.

Akamai defines "normalized net income per share" as normalized net income, plus interest add-back for diluted share calculation, divided by the basic weighted average or diluted common shares outstanding used in GAAP net income per share calculations. Akamai considers normalized net income per share to be another important indicator of overall performance of the Company because it eliminates the effect of non-cash items. Adjusted EBITDA and normalized net income should be considered in addition to, not as a substitute for, the Company's operating income and net income, as well as other measures of financial performance reported in accordance with GAAP.

Reconciliation of Non-GAAP Financial Measures
In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the Company is presenting the most directly comparable GAAP financial measures and reconciling the non-GAAP financial metrics to the comparable GAAP measures.

 











Reconciliation of GAAP net income to Normalized net income

and Adjusted EBITDA

(amounts in thousands, except per share data)












Three Months Ended


Nine Months Ended


Sep. 30,


Jun. 30,


Sep. 30,


Sep. 30,


Sep. 30,


2012


2012


2011


2012


2011





















Net income

$ 48,231


$ 44,239


$ 42,285


$ 135,697


$ 140,823











Amortization of other intangible
assets

5,381


5,463


4,185


15,611


12,754

Stock-based compensation

22,635


25,621


15,141


69,180


42,465

Amortization of capitalized
stock-based compensation

2,025


1,939


1,592


5,719


5,595

Acquisition related costs (benefits)

279


376


-


5,107


(440)

Restructuring (benefit) charge

-


(46)


158


14


158











Total normalized net income:

78,551


77,592


63,361


231,328


201,355











Interest income, net

(1,593)


(1,626)


(3,002)


(4,865)


(9,058)

Provision for income taxes

33,280


25,529


25,862


88,366


78,218

Depreciation and amortization

46,051


42,710


35,984


127,873


105,879

Other expense (income), net

241


(1,131)


188


(449)


1,330











Total Adjusted EBITDA:

$ 156,530


$ 143,074


$ 122,393


$ 442,253


$ 377,724











Normalized net income per share:










  Basic

$ 0.44


$ 0.43


$ 0.35


$ 1.30


$ 1.09

  Diluted

$ 0.43


$ 0.43


$ 0.34


$ 1.27


$ 1.06











Shares used in normalized
per share calculations:










  Basic

177,455


178,547


183,085


178,040


185,515

  Diluted

181,053


181,817


185,704


181,738


189,089











 

Akamai Statement Under the Private Securities Litigation Reform Act
This release contains information about future expectations, plans and prospects of Akamai's management that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995, including statements about future revenue growth. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including, but not limited to, effects of increased competition including potentially failure to maintain the prices we charge for our services and loss of significant customers; failure of the markets we address or plan to address to develop as we expect or at all; inability to increase our revenue at the same rate as in the past and keep our expenses from increasing at a greater rate than our revenues; a failure of Akamai's services or network infrastructure; delay in developing or failure to develop new service offerings or functionalities, and if developed, lack of market acceptance of such service offerings and functionalities or failure of such solutions to operate as expected, and other factors that are discussed in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other documents periodically filed with the SEC.

In addition, the statements in this press release represent Akamai's expectations and beliefs as of the date of this press release.  Akamai anticipates that subsequent events and developments may cause these expectations and beliefs to change.  However, while Akamai may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so.  These forward-looking statements should not be relied upon as representing Akamai's expectations or beliefs as of any date subsequent to the date of this press release.

Contacts:



Jeff Young


Natalie Temple

Media Relations


Investor Relations

Akamai Technologies

--or--

Akamai Technologies

617-444-3913


617-444-3635

jyoung@akamai.com 


ntemple@akamai.com

 

SOURCE Akamai Technologies, Inc.



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